The Coronavirus pandemic is touching every fiber of business, and the supply chain is no exception. As of March 2020, three-quarters of companies dealing in consumer products were facing supply chain disruptions owing to COVID-19. The affected organizations tried and are still trying to adapt to the challenges posed by the epidemic.
Over the past few years, companies have been re-purposing their supply chains to cut down costs. At the time, a profit-maximizing strategy appeared to be optimal. However, COVID-19 is exposing the flaws present in such an approach. In the future, the long-term solutions implemented must cater to unexpected occurrences, such as the current pandemic.
Effects Of COVID-19 On the Supply Chain
The coronavirus pandemic started in China, a country that exports almost 60% of consumer goods. By March 2020, some Chinese manufacturers were operating at 50% capacity. They had lost nearly half their staff. Such labor shortages are responsible for reduced production and the bullwhip effect.
As the pandemic spread to other countries, governments put in place measures to curb its spread. The measures included the cessation of movement, mandatory quarantines, and social distancing rules. All these safeguards affect the supply chain negatively.
To start with, restricting transportation means delivery failures. Distributors lack the means of dispatching making delivery costs soar. Also, drivers play a significant role in a functional supply chain, and if quarantine and virus infections take them out of the equation, transport halts.
Finally, under-staffing is a significant cause of dysfunctional shipping. With ports becoming hot-spots of the virus, staff had to go home to avoid the plague. Businesses have a hard time delivering goods to consumers when shipping delays.
But business units are not sitting on their hands waiting for the pandemic to disappear. They are actively adapting their supply chains to address the current situation. The solutions they are implementing may have long term effects on the supply chain.
COVID-19 Long-Lasting Effects on the Supply Chain
The supply chains of the future should supposedly be flexible. Businesses aim to quickly adapt to developing situations without losing their ability to deliver to their customers. In times to come, logistic networks may be having valuable components that enable quick adjusting. Some permanent changes to supply chains owing to coronavirus include:
AI And Supply Chains
One of the valuable components in the chain will be an AI-backed cloud platform, such as Verusen. Artificial intelligence will no longer a fancy optional feature in the supply chain. On the contrary, future supply chains will require a real-time data source showing obsolete and overstocked inventory items.
Additional benefits of AI-powered cloud platforms include reliable inventory insights and harmonized inventory data from different systems. With such a tool, businesses will add some degree of agility to their supply chain.
Getting Closer to Manufacturers
Another long-lasting trend that may feature is businesses trying to get a supplier in their home country. If production in their home countries is impossible, enterprises may seek suppliers in a location close to their home countries.
Unquestionably, this move will not be an easy feat. There have been some prominent manufacturers who are difficult to replace. For example, China produces over 40% of technology, media, and telecom (TMT) products. Finding a new supplier to top this production is challenging. However, US companies are already seeking TMT products from Vietnam and Mexico.
Remote Working Systems
Coronavirus has made it necessary to work without physically reporting to an office. In the future, businesses will be designing their supply chains to function with a work-from-home staff. With the world still fighting COVID-19, enterprises continue to device various ways of maintaining a remote workforce.
Businesses will continue perfecting the art of managing remote staff. Practices such as decentralizing decision making will go a long way to avoid the micromanagement of employees. With functional work-from-home personnel, the supply chain may survive a similar pandemic.
“China + 1” Strategy
China is a notable player in global economics. Other than producing 60% of consumer goods and over 40% of TMTs, it is the leading manufacturer of active pharmaceutical ingredients (API). API markets such as India and Mexico, which are leading producers of generic medicines, stand to suffer after China’s act of closing shop.
China plus one strategy is a guard against the downside of a major manufacturer shutting down production. In the future, businesses will continue to adopt this strategy. It appears beneficial to diversify supply chains since a disruption in one region may not affect an entire system.
Currently, some Asian manufactures are implementing China plus one strategy. While the costs of diversifying the supply chain are a vital consideration, they are not the primary determinant. Organizations are more interested in securing their supply chain. Of course, using an AI-backed cloud platform has benefits that mask the re-shoring capital outlays.
Testing Supply Chains
In the future, businesses will be critically analyzing their supply chains. It will become imperative to ensure that the chain can survive several adverse situations, such as the one presented by COVID-19.
Businesses will have to develop models that will allow a holistic evaluation of the supply chain. An in-depth examination should reveal how stable the chain is and how quickly a business can adapt it to a particular situation. Also, it should demonstrate how sustainable the operation can be.
It may become a normal thing to hear businesses having a contingency plan in place if the supply chain fails. For example, an enterprise may partner with a logistics company to deliver goods to its customers when its supply chain can’t.
Adapting Is the Name of The Game
The effects that COVID-19 has on the supply chain will model the future’s logistics networks. As the future remains a mystery, the winning companies will be those ready to adapt to the next challenge.
When responding to the long-lasting effects of COVID-19, companies will modify their supply chains in different methods. However, using platforms such as Verusen to keep supply chain costs down will remain an added advantage